The federal student-aid system does not serve Latino and other "post-traditional" students as well as it could, and should be redesigned to better reach those growing demographic groups, according to a new report by Excelencia in Education, an advocacy group focused on Latino-student success.

The report, one of 16 commissioned by the Bill & Melinda Gates Foundation in its $3.6-million Reimagining Aid Design and Delivery project, calls for changes in the formula used to determine family need and for increased spending on college preparation and work-study programs. It suggests making the Pell Grant an entitlement—an idea endorsed by the New America Foundation in its recent report for the project—and proposes changes in the formula used to award campus-based aid.

The current formula for allocating such aid—Perkins loans, Supplemental Educational Opportunity Grants, and Federal Work Study—tends to benefit colleges that joined the programs when they were created, in the 1970s. That means that public flagships and private colleges, particularly those in the Northeast, get a disproportionate share of the money, even as low-income and minority students are flooding colleges in the Southwest.

Yet redistributing the money won't be easy. The last time Congress tried to rewrite the formula, in 2004, traditional colleges fought back, and lawmakers ultimately abandoned the plan. Still, Deborah A. Santiago, the report's author, said she's optimistic that the plan could be enacted today, given the nation's rapidly changing demographics and President Obama's support for remaking campus-based aid.

"If you're looking with a national lens at these issues, the fastest growth is in the Southwest," she said during a news briefing. "I think there is interest in revisiting it now."

'The American Way'

Equally controversial is the report's recommendation that students be required to complete a Free Application for Federal Student Aid, or Fafsa, when they apply to college. In the briefing, Ms. Santiago acknowledged that requiring students to apply for aid "may seem counter to the American way," but she argued that too many Latino students are missing out on grants and loans because they don't complete the form or answer its follow-up questions.

The report also calls for better aligning federal student-aid programs and student-support services, and making sure that information about college costs and student outcomes reach Latino students.

Yet Ms. Santiago, who is vice president for policy and research at Excelencia, said more needed to be done to educate Latino students about the comparison tools.

"If it doesn't reach this post-traditional student body, it's not going to inform them, even if it's a good tool," she said. "We have to be intentional in our outreach, and not think that just by putting it together, we've accomplished the goal of having useful and transparent information."

Latino students account for 14 percent of college enrollments, making them the second largest racial or ethnic group in higher education today. Yet their educational attainment lags behind the general population, with 21 percent of Latinos holding an associate degree or higher, compared with 41 percent of all adults.